Restaurants Go Retail

By
From the August 2013 issue of Columbus CEO

A growing number of Central Ohio companies are selling their products in grocery stores across the country. From fried rice to salad dressing, customers are loading up their carts

The legend of the Kahiki Supper Club still looms large in the memory of Columbus diners 13 years after the destination restaurant closed its doors. Founded in 1961, the Polynesian restaurant on East Broad Street was the place to dine out on anniversaries and birthdays, and an obvious recommendation for out-of-town business guests. The tiki torch burns on, not in a sit-down restaurant, but in the frozen foods aisle of grocers in most states east of the Mississippi.

“Even though the restaurant’s been closed for a long time, we have a lot of the icons in the building from the restaurant,” says Darc Zbinovec, president of Kahiki Foods. Kahiki manufactures more than 70 retail products in its 119,000-square-foot production facility in Gahanna. (Zbinovec declined to disclose sales volumes or revenue for the company, which is owned by Pittsburgh-based holding company Abarta.)

Though only a handful of the frozen dishes are made from original Kahiki recipes—such as the General Tso’s sauce—shoppers associate the brand with restaurant-quality Asian cuisine.

“They’re looking for flavors that kind of replicate that restaurant experience. I think a lot of consumers, they start eating different kinds of foods, really, through restaurant experience,” says Zbinovec. She says the retail brand carries on the original Kahiki quality by sticking with the restaurant’s fresh, natural ingredient base. “For the convenience, and costreally, they want to eat those products at home.”

It’s not a revolutionary concept, but it’s one that’s gaining traction in grocery chains as shoppers increasingly seek out familiar tastes and, in some cases, simpler ingredients and locally made goods. A recognized restaurant label is an inviting way for consumers to embrace both of these retail food trends.

“It’s unbelievable, really, how many restaurant brands there are out there,” says Bruce Macaulay, president of the Columbus division of Kroger. “You think about Tony Packo’s in Toledo, Ohio. You think about Skyline Chiliou think about some of the regional products that are really successful and very well-known by consumers. I think that’s what helps make the brands very successful.”

A number of Columbus restaurants have segued into the retail food market, including Donatos Pizza, Marzetti and White Castle.

Lisa Ingram, president of White Castle System Inc., credits her father, loyal restaurant customers and the microwave for pushing Sliders into the retail market. Bill Ingram, White Castle’s CEO and chairman, established the products division in 1986 after noticing an unusual purchasing pattern in his stores.

“Customers would come in and order in 20s and 30s, but they wanted to take some home and put them in their freezer,” says Ingram. Her father asked customers why they’d want to freeze Sliders. “They said, ‘Well, I got this great new thing called a microwave. And if you take the burgers out and you put them in a microwave, they heat up really nicely. You should try it!’

Ingram tried it, liked it and set about automating the process to cut down on the time his restaurant employees were spending to wrap take-home Sliders. Using a machine meant for pancake manufacturing, White Castle began manufacturing and packaging itshamburgers and cheeseburger for supermarket sales.

Today, White Castle’s frozen foods division, WCD Food Productsrepresents about 15 percent of companywide sales, says Ingram. With 406 White Castle restaurants across the country, companywide revenue was $618 million in 2012

Roughly a dozen different retail sandwiches and buns are made in White Castle plants located in Covington and Louisville, Ky.; a third 75,000-square-foot Vandalia, Ohio, plant with two production lines is set for completion in December. The company sells retail products through direct shipping, wholesalers and distributors nationwide all major grocery chains as well as drugstores and convenience stores.

“We are a regional restaurant chain, but there are a lot of people who have moved out of the Midwest or out of the East Coast to other parts of the country,” where there are no White Castle restaurants, says Ingram. “So we’ve seen lots of growth in that division as we expand across the nation.”

White Castle is considering international expansion and sales to military retail outlets. Popular menu items such as chicken sandwiches and onion chips may be next to appear on store shelves.

Dressed for Success

Further back in Columbus culinary history, demand from Statehouse clientele led Italian immigrant Teresa Marzetti to start bottling her salad dressings in her East Broad Street restaurant in the early 1900s. By 1954, demand had grown enough to begin construction o manufacturing plant on Indianola Avenue in north Columbus.

Marzetti’s closed in 1972 afterTeresa died, but her namesake products are still manufactured in the Indianola facility, which has sincebeen expanded. T. Marzetti Co. now has two other manufacturing plants in Columbus as well as distribution centers in Grove City and on the East Side.

Lancaster Colony Corp. owns Marzetti and more than a dozen other brands, including Sister Schubert’sand New York Brand frozen breads, Reames noodles and Jack Daniel’s mustardsAccording to Lancaster Colony’s 2012 annual report, the company had total net sales of $1.1 billion last year. Specialty foods accounted for 87 percent of that total, or $989 million. Of roughly 2,500 employees othe T. Marzetti payroll, 900 are based in Central Ohio.

“The brand itself is national, and we have distribution in every major retailer in America,” says Joe Tuza, senior vice president of Marzetti’s retail division. “We are very proud of the fact that in our five key product areas, we are No. 1 in market share in each of those categories.”

According to Information Resources Inc., a market research company serving the consumer packaged goods and retail industry, Marzetti’s refrigerated salad dressing, produce dip and croutons are first nationwide in their respective shares.

Marzetti’s success is rooted in the restaurant’s recipes,such as the popular Original Slaw Dressing. “If they recognize the brand then it helps drive demand for that product,” says Tuza.

Still, a number of factors have gone toward ensuring Marzetti products’ continued sales power. Solid working relationships with large retailers such as Costco, Giant Eagle, Kroger and Walmart are crucial. Marzetti has become a trusted supplier, earning placement in the coveted perimeter section of grocers produce departments. “That’s where retailers are spending a lot of their money to focus consumers to that perimeter of the store,” says Tuza. “We become a cog in that strategy to help them deliver what they’re trying to do with their customers.”

Thanks to customer loyalty cards, grocery chains are spending more time than ever analyzing consumer data. The loyalty exhibited by Marzetti shoppers, for example, determines whether they will buy another product or go to a different supermarket for a product should one they seek be absent from store shelves. Tuza makes it a point to be on top of market research. “It’s hard to manage every aspect of the business on a national basis without having a data overview to understand where you’re growing and where you’re declining and how you can manage each of those individually,” he says.

T. Marzetti Co uses market data to develop new products to meet consumer demands. Becauseits brands are already carried in most major grocery chains, the company’s growth potential lies in new lines. In recent years, Marzetti has launched hummus and Greek yogurt products as both gained mainstream consumer popularity. “We started out as a salad dressing business, now the Marzetti name is across multiple categories,” says Tuza.

T. Marzetti President Bruce Rosa says the company safeguards the brand by maintaining consistency in production as well as in relationships with clients such as Wendy’s, where salads are served with Marzetti-brand dressings and croutons. “Our products are sold to consumers on a national basis and our food service products are sold to 18 of the top 25 national restaurant chains in the country. So we maintain very high quality standards both for the consumer market and the food service market,” Rosa says.

Perfecting the Product

In 2005, Donatos and Kroger began brainstorming a way to bring convenient, restaurant-quality meals to grocery store customers. A deal was struck and Kroger began selling Donatos pizzas. Initially, Donatos simply provided the ingredients for Kroger employees to prepare for customers on-demand.

“Over time, we learned that probably the best way to scale up and grow into as many Kroger locations as possible is to make the pizzas here and bring them out to Kroger locations. That really started us,” says Donatos President and CEO Tom Krouse.

The company, which Jim Grote started in 1963 for $1,300, already manufactured dough for its restaurants at a Taylor Station Road production facility. As take-and-bake sales in Kroger grew, Donatos added automation to the process and began manufacturing whole pizzas for sale in retailsetting

“That was really the impetus for the idea of thinking about our facility as a way to produce consistent, high-quality pizzas in other areas,” says Krouse. In 2008 the company, which now has 200 restaurants in six states, expanded into retail with the founding of Jane’s Dough Foods. The division is led by general manager Alan Hoover, former president of Kahiki Foods.

Named for Jane Grote Abell, one of Grote’s daughters who co-owns the company and chair Donatos board, ane’s ough Foods product are sold more than 3,000 retail distribution points in 26 states and Japan. They include a line of Fresh Bake take-and-bake Donatos pizzas, Fast Break microwavable personal pies and Sonoma multigrain and gluten-free flatbreads. revenue is an eighth of the rest of the business, says Krouse: “It’s about a $20 million business right now.”

Jane’s Dough products undergo a litany of quality tests before they hit shelves. The company also ire brokers to visit grocery stores to check the qof the pizzas that are displayed and sold

“Ultimately, the customer makes the decision based on the quality of the product whether or not he brand will be successful or not,” says Kroger’s Macaulay. “I can’t speak for Donatos or Kahiki, but I’m sure that their goals were to make sure that they had a taste profile for their brand that would be comparable to what they could sell in a restaurant so that the consumer [isn’t] disappointed.”

If a customer buys a meal in a restaurant but finds the grocery product is different, the brand’s reputation will take a hit. Jane’s Dough relies on a full research-and-development department and staff chefs to keep up with consumer tastes and maintain consistency shoppers expect. The increased customer reach combined with the cost benefitsoflarger-scale manufacturing and distribution are a big win for Donatos’ overall business strategy.

“We have potential to double the business here in the next threefive years,” says Krouse. “That brings all the efficiencies to our restaurants. It makes the dough prices more affordable for our franchise partners. Just a real win-win for everybody.”

Retail Comes First

Other popular Columbus names, such as Bob Evans and Carfagna’s, started not with restaurants but with products—namely meats.

Sam and Dino Carfagna started their careers in the 1970s and ’80s delivering fresh meats from the family grocery store on state Route 161 in Northland to restaurants around town. The specialty grocery remains a neighborhood staple. However, tfamily’s meat and grocery distribution declined as local steakhouses such as the Top and the Clarmont lost business to chain restaurants. When the chains moved in, they brought their own supply and distribution channel“We felt that we needed to get involved in the manufacturing side of the business to keep our business up to replace that side of the industry,” says Sam Carfagna.

In 1995, the brothers launched a manufacturing plant near Downtown, bottling family-recipe sauces, dressings and soups that originated in Carna’s grocery. In March, Carfagna’s Italian Foodsmanufacturing operations moved to a larger 11,000-square-foot facility in north Columbus as distribution of the retail products continue to increase supermarkets such as the Anderson’s, Giant Eagle, Kroger and Whole Foods. “Stores like hometown people, things that are locally made, natural,” says Dino Carfagna.

The brothers say their growth into manufacturing, catering and even their restaurant, Carfagna’s Kitchen on Polaris Parkway, has been measured. “We want to do it so we still have the consistency, because our name goes on that. It’s not a name that somebody made up,” says Dino Carfagna.

To keep that consistency, the Carfagnas enlisted cousin Jim Cua as executive chef and plant manager. Cua adapts recipes for bulk preparation and to meet packaging requirements necessary to maintain shelf life. He’s adept at tweaking the family’s all-natural recipes to account for variations in produce, mainly tomatoes.

The business is risky, say the Carfagnas. “If it’s not selling well, [grocers might] dump you right away,” says Sam Carfagna. You have to continually never sit on your hands, to keep something fresh and new happening.”

The Carfagnas are confident in the success they have achieved so far through their simple ingredient labels, original recipes and the loyalty of customers introduced to their products through the grocery, a catered event or a visit to their restaurant.

Even longtime Columbus residents may not know that Bob Evansbegan as a sausage company founded Southeast Ohio in 1953.Founder Bob Evans had begun making sausage in 1948 to serve at his Gallipolis diner. The first restaurant didn’t open until nearly a decade later.

Today, the company—Bob Evans Farms Inc.has 590 restaurants in 19 states; products from BEF FoodsInc. retail division are sold in more than 30,000 locations in all 50 states, Canada and Mexico. The company sells 400 different retail items, including sausage, side dishes and frozen foodalso distributes products to the restaurants.

“Our target is pretty much the same consumer,” between grocery stores and estaurants, says Mike Townsley, president of BEF ood. Products are made in the company’s Lima manufacturing facility.Retail sales currently make up 28 percent of the companywide revenue totals, says Townsley. According to the company’s 2012 annual report, Bob Evans Farms had $1.65 billion in net sales last fiscal year.

Bob Evans Restaurants “in-source” their soups and sausages from BEF oodalso promote the retail products to diners. “We [are] able to leverage that to provide a quality product at a price point that they could promote and drive sales in the stores,” says Townsley.

Townsley’s goal is to grow the retail business to 50 percent of the company’s revenue in the next five to eight years.

Kitty McConnell is a reporter for Columbus CEO.

Homegrown Hunger-Busters

Photos by Tim Johnson

Here’s a sampling of products that Central Ohio shoppers can find in the aisles of their local grocery store:

Bob Evans sausage & sides

Bob Evans was selling sausage to shoppers even before there were Bob Evans restaurants. But for the past 15 years, the company’s biggest retail success has been refrigerated side dishes such as mashed potatoes, macaroni and cheese and sausage gravy.

“From an innovation perspective, most recently our refrigerated side dishes are doing well. I wouldn’t say that we invented refrigerated side dishes, but it is really our brand that is taking it to the next level,” says Mike Townsley, president of BEF Foods Inc.

Carfagna’s sauces

The Carfagna brothers manufacture a line of five pasta sauces in their north Columbus production facility. Brothers Sam and Dino Carfagna, along with cousin and executive chef Jim Cua, pride themselves on the simple ingredient labels and the use of fresh products including tomatoes, olive oil, garlic and other fresh herbs and vegetables.

Varieties include: the spicy Pootaneska sauce made with tomatoes, black olives and garlic; the Sicilian, made with baby portobello mushrooms and roasted peppers; the basil and garlic-heavy Pomodoro Basilico; the cheesy Homemade Vodka Sauce made with fresh cream; and Carfagna’s Famous Italian Market Original Gourmet Pasta Sauce, made with tomatoes, olive oil and Chianti. All are available in select stores and at www.carfagnas.com.

Marzetti dressings

Most produce aisles in and around Columbus feature several shelves stocked with a variety of Marzetti refrigerated dressings and dips. Marzetti Classic Refrigerated Dressings are made with no preservatives and come in a variety of traditional flavors including chunky blue cheese, classic ranch, honey dijon and spinach salad. Most are gluten-free and come in light varieties for calorie counters.

T. Marzetti Co. is also the largest crouton manufacturer in the nation, according to Joe Tuza, senior vice president of the company’s retail products division. Marzetti croutons are made in whole grain, sea salt and pepper, ranch, garlic and butter, and fat-free garlic and onion varieties.

White Castle frozen hamburgers

Harold and Kumar could have avoided their legendary misadventures by simply stocking the freezer with frozen Sliders. White Castle Systems Inc. sells frozen hamburgers and cheeseburgers in all 50 states.

The company’s website has a list of locations as well as recipes for creative new ways to prepare your Sliders for breakfast, lunch, dinner or a late-night snack. Winning entries from White Castle’s annual cook-off contest include “The Morning Crave” and “Spicy Cheeseburger Soup.”

Cutlines:

Bruce Rosa (left), president of T. Marzetti Co., with Joe Tuza, senior vice president of retail, in the lobby of the company headquarters

Sonoma Flatbreads by Donatos are a popular retail item for Jane’s Dough Foods.

Owners Dino (left) and Sam Carfagna flank Jim Cua, executive chef and plant manager for Carfagna’s Italian Foods.

Ingram in the White Castle at Kenny and Henderson roads